92-109

57 FR 879

NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration.

(C-549-701)

Certain Steel Wire Nails From Thailand; Preliminary Results of Countervailing
Duty Administrative Review and Intent to Rescind Countervailing Duty Order, in
Part

Thursday, January 9, 1992

AGENCY: International Trade Administration/Import Administration, Department of
Commerce.

ACTION: Notice of preliminary results of countervailing duty administrative
review and intent to rescind countervailing duty order, in part.

SUMMARY: The Department of Commerce has conducted an administrative review of the
countervailing duty order on certain steel wire nails from Thailand for the period
January 1, 1989 through December 31, 1989. We find that the scope of the countervailing duty
order included certain non-dutiable merchandise from a GATT-signatory country. This notice
hereby announces the Department's intent to rescind that portion of the countervailing duty
order on the duty-free merchandise. We invite interested parties to comment on the intent to
rescind the countervailing duty order, in part.

With regard to the dutiable merchandise covered by the remainder of the countervailing duty
order, we preliminarily determine the total bounty or grant to be 0.46 percent ad volorem. In
accordance with 19 CFR 355.7, any rate less than 0.50 percent ad valorem is de minimis. We invite
interested parties to comment on these preliminary results.

EFFECTIVE DATE: January 9, 1992.

FOR FURTHER INFORMATION CONTACT:Patricia W. Stroup or Michael Rollin, Office of
Countervailing Compliance, International Trade Administration, U.S. Department
of Commerce, Washington, DC 20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION:

Background

On October 5, 1990, the Department of Commerce (the Department) published in the Federal
Register a notice of "Opportunity to Request Administrative Review" (55 FR 40901) of the
countervailing duty order on certain steel wire nails from Thailand (52 FR 36987,
October 2, 1987) for the period January 1, 1989 through December 31, 1989. On October 31, 1990,
certain petitioners in the original investigation requested an administrative review of the
order. We initiated the review on December 10, 1990 (55 FR 50739). The Department has now
conducted this administrative review in accordance with section 751 of the Tariff Act of
1930, as amended (the Act).

Scope

In our notice of Final Affirmative Countervailing Duty Determination and
Countervailing Duty Order (52 FR 36987, October 2, 1987), the merchandise covered by the
investigation was described as follows:

The products covered by this investigation are certain steel wire nails from Thailand. These
nails are: One-piece steel nails made of round wire, as currently provided for in Tariff Schedules of
the United States Annotated item numbers 646.2500, 646.2610-90 and 646.3040; two-piece steel
wire nails as currently provided for in item number 646.3200; and nails with steel wire shanks and
lead heads, as currently provided for in item number 646.3600. These products are currently
classifiable under Harmonized System item numbers 7317.00.55, 7317.00.65, 7317.00.75 and
7616.10.10.

With respect to Harmonized Tariff Schedule (HTS) item number 7616.10.10, this number applies
only to aluminum nails. In the petition, petitioners did not include aluminum nails in the
description of the covered merchandise and the Department did not investigate aluminum nails.
Accordingly, we are clarifying the scope of the order to exclude aluminum nails imported under
HTS number 7616.10.10.

In addition, the Department intends to rescind that portion of the countervailing duty order
covering those items which were duty-free at the time of the investigation. This merchandise
includes certain steel wire nails, previously provided for in Tariff Schedules of the United States
Annotated (TSUSA) item number 646.3040; TSUSA item number 646.3200, two piece steel wire
nails; and TSUSA item number 646.3600, nails with steel wire shanks and lead heads. These
products are currently provided for under HTS item numbers
7317.00.65 and 7317.00.75, both of which continue to have duty-free treatment.
The merchandise covered by the remainder of the countervailing duty order, and subject of
this administrative review, is described as: One-piece steel nails made of round wire, as previously
provided for in TSUSA item number 646.2500 and 646.2610-90. These products are currently
provided for under HTS item number 7317.00.55. The TSUSA and HTS numbers are provided for
convenience and Customs purposes. The written description remains dispositive.
This administrative review covers the period January 1, 1989 through December 31, 1989, and
seven programs. One producer, K.Y. Intertrade (KYI), and one trading company, Asoke, accounted
for substantially all exports of the subject merchandise from Thailand to the United States
during the review period. Both of these companies, and the firms supplying substantially all nails to
the trading company, responded to the Department's questionnaires.

Intent to Rescind Countervailing Duty Order, in Part

During the conduct of this administrative review, the Department found that certain merchandise
covered by the countervailing duty order (the Order) was duty-free under the Generalized
System of Preferences (GSP) and had been duty- free at the time of the investigation.
Since Thailand is a member of the General Agreement on Tariffs and Trade
(GATT), and as certain of the nails covered by the Order are non-dutiable, petitioner was required
to allege that, and the U.S. International Trade Commission was required under section 303(a)(2) of
the Act, to determine whether imports of these duty free products caused or threatened to cause
material injury to the U.S. industry in question. Under the provisions of this paragraph, the
Department lacks the authority to impose duties on duty-free merchandise from Thailand
unless an affirmative injury determination has been made. (See, e.g., Certain Fasteners from India;
Final Results of Administrative Review and Partial Revocation of Countervailing Duty Order
(47 FR 44129, October 6, 1982); Wool from Argentina; Termination of Countervailing Duty
Investigation (47 FR 57981, December 29, 1982); Carbon Steel Wire Rod from Trinidad and
Tobago; Final Results of Changed Circumstances Administrative Review and Revocation of
Countervailing Duty Order (52 FR 45982, December 3, 1987); and, Amendment to Scope of
Investigation;

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Leather from Argentina (55 FR 13303, April 10, 1990).)
By letter of November 15, 1991, the Royal Thai Government (RTG) requested that the Department
revoke the countervailing duty order on this merchandise, and, on November 21, 1991,
petitioners formally withdrew that portion of the petition covering the duty-free merchandise.
Accordingly, The Department intends to rescind that portion of the countervailing duty
order on imports of non-dutiable nails from Thailand, as
described in the "Scope" section of this notice.

Analysis of Programs

I. Programs Preliminarily Determined to Confer Bounties or Grants

A. Export Packing Credits

Export packing credits (EPCs) are short-term pre-shipment and post-shipment export loans.
Exporters apply to commercial banks for EPCs and the commercial banks, in turn, submit the
applications to the Bank of Thailand (BOT) for approval. Under the "Regulations Governing the
Purchase of Promissory Notes Arising from Exports" (B.E. 2528), effective January 2, 1986, the BOT
repurchases promissory notes issued by creditworthy exporters through commercial banks. To
qualify for the repurchase arrangement, promissory notes must be supported by a letter of credit,
sales contract, purchase order, usance bill or warehouse receipt. The notes are available for a
maximum of 180 days and interest is payable on the due date of the loan.
The BOT charges the commercial bank account for the principal amount plus five percent interest
per annum on repurchased packing credits issued in connection with exports of goods specified in
categories one and two of the "Notification
of the Board of Investment No. 40/2521." The commercial bank then charges the exporter's
account for the principal amount plus up to seven percent interest on the due date of the loan.
If the commercial bank does not meet the terms of the loan, the BOT charges the commercial bank a
penalty, retroactive to the first day of the loan, at an eight percent interest rate. If the exporter
does not meet the terms of the loan, the commercial bank passes on to the borrower the additional
eight percent penalty charge.
If the exporter can prove that shipment of the goods took place within 60 days after the due date
(in the case of pre-shipment loans), or the foreign currency was received within 60 days after the
due date (in the case of post-shipment loans), the penalty is refunded to the commercial bank by
the BOT and the commercial bank credits the exporter's account. If only a portion of the goods was
shipped or only a portion of the foreign currency was received by the due date, the exporter
receives only a partial refund, proportional to the value of the goods shipped or the foreign
currency received The purpose of the penalty charge is to ensure that companies are using the EPCs
to finance export sales.
On October 1, 1988, the RTG issued new regulations that coexisted with the prior regulations until
December 31, 1988. Effective October 1, 1988, all first-time applicants for EPCs had to apply under
the new regulations. Established users of the EPC program had the option of taking out promissory
notes under either the old or the new regulations. EPCs received under the previous regulations,
but still outstanding as of January 1, 1989, continued under the previous regulations until their
expiration dates.
The new regulations implemented several changes in the EPC program. Now, only pre-shipment
financing is permitted, the maximum interest rate that commercial banks can charge exporters was
increased from 7 to 10 percent, and the BOT repurchase rate was changed to 4 percent for small
exporters and 5 percent for large exporters. The penalty charge to exporters was reduced from 8 to
5 percent. In addition, commercial banks can lend up to 100 percent of the shipment value, but can
only rediscount up to 50 percent of the loan amount with the BOT. Under the previous regulations,
the commercial banks could only lend up to 90 percent of the shipment value and the BOT
rediscounted 100 percent of the loan amount.
Because only exporters are eligible for these loans, we preliminarily determine that they are
countervailable to the extent that they are provided at preferential rates.
For our benchmark interest rate, we used an average of the interest rates charged on, loans and
overdrafts during the review period. The average rate was 11.75 percent for loans taken out in
1988, and 12.23 percent for loans taken out in 1989. In the countervailing duty investigation
of steel wire rope from Thailand (See, Final Affirmative Countervailing Duty
Determination and
Order; Steel Wire Rope from Thailand (56 FR 46299, September 11, 1991)), the
Department determined that these were the most appropriate rates to determine the benchmark
because loans and overdrafts accounted for approximately 70 percent of all short-term financing
in Thailand during the period of review.
Comparing the benchmarks for 1988 and 1989 to the rates charged on the EPCs, we find that the
rate on EPCs is preferential and, therefore confers a bounty or grant on exports of steel wire nails.
Only KYI used these EPC loans to finance U.S. exports of the subject merchandise during the review
period.
To calculate the benefit from the EPC loans on which interest was paid during 1989, we followed the
short-term loan methodology which has been applied consistently in our past determinations (See,
Final Affirmative Countervailing Duty Determination and Countervailing Duty Order:
Butt-Weld Pipe Fittings from Thailand (55 FR 1695, January 18, 1990) and Final Affirmative
Countervailing Duty Determination and Countervailing Duty Order: Ceramic Tile
from Mexico (53 FR 15090, April 27, 1988)), and § 355.44(b)(3) of "Notice of Proposed Rulemaking
and Request for Public Comment" (54 FR 23366, May 31, 1989).
As KYI was able to provide information on EPCs taken out specifically for exports of nails to the
United States, we compared the amounts of interest it paid on these EPCs to the amount of interest
which would have been paid on similar loans at the benchmark rates. We deducted the total amount
of interest (including unrefunded penalties paid during the period) paid by KYI
from the amount of interest which would have been paid at benchmark rates, then divided the
resulting interest differential by the value of KYI's U.S. nail exports for the period. We then
weighted the benefits received by KYI by its share of nail exports to the United States during the
period of review. As a result, we preliminarily determine the weighted average bounty or grant
under this program to be 0.33 percent ad valorem.

B. Tax Certificates for Exports

The Tax and Duty Compensation of Exported Goods produced in the Kingdom Act of 1981 (Tax and
Duty Act) provides for rebates to exporters for indirect taxes and imported duties on inputs used to
produce exported goods. These rebates are provided to the exporters in the form of tax
certificates. These certificates may be used by the companies to pay various tax liabilities or they
may be sold or traded to other companies. These are two rates for the tax certificates for each
eligible product sector, the "A" rate rebates both import duties and indirect domestic taxes, and is
claimed by exporters that have

*881

incurred import charges and have not otherwise had duties refunded. The "B" rate rebates only
indirect domestic taxes and is claimed by exporters who have not paid import duties or who
participate in Thailand's customs duty drawback program or duty exemption program on
imported raw materials, or who do not import raw materials for use is production.

In all previous investigations and administrative reviews involving Thailand's program of tax
rebates, these rebate rates have been computed on the basis of an Input/Output (I/O) study
initially published in 1980, based on 1975 data, and updated in 1985 using 1980 data.
Thailand's Ministry of Finance (MOF) used the I/O study to compute the value of total inputs
(both imports and local purchases) used in a discrete range of sector-specific products at
ex-factory prices. The Ministry then calculates the import duties and indirect domestic taxes on
each input, and the A and B rebate rates described above.
In the Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order; Certain Steel Wire Nails from Thailand (52 FR 36987, October 2, 1987), the Department
examined Thailand's rebate system under the Tax and Duty Act and found that the program
was intended to rebate indirect taxes and import duties and that, based on the methodology
employed by the MOF at that time, the rebate rates had been reasonably calculated. (For more
detailed discussions of the sector-specific rebates see, Final Affirmative Countervailing Duty
Determination; Certain Textile Mill Products from Thailand (52 FR 7638, March 12, 1987),
Final Affirmative Countervailing Duty Determination and Countervailing Duty Order;
Carbon Steel Butt-Weld Pipe Fittings from Thailand (55 FR 1695, January 18, 1990), and Final
Affirmative Countervailing Duty Determination and Countervailing Duty Order;
Steel Wire Rope from Thailand (56 FR 46299, September 11, 1991)).

In 1987, the Ministry of Finance (MOF) devised a new methodology for calculating product-specific
rebate rates for nails, first, to eliminate rebates on non-physically incorporated inputs, and second,
to adjust the denominator used in the calculation of the rebate rate to f.o.b value, the basis upon
which the certificates are granted. This new product-specific methodology used by the MOF is
called the physical input coefficient methodology (PHIC).
To establish the new rebate rates, the MOF first surveyed nail producers in 1987, to obtain 1986
data on the source, amount and value of inputs used in nail production, and information on sales of
finished products.
Based on the survey responses, the MOF identified the physically incorporated inputs for nails and
calculated corresponding values for each input, per ton, of nails produced. This per-ton value is
called the "input coefficient." The calculation of tax incidence varies by input based on sourcing.
The indirect taxes rebated in the PHIC methodology are (1) the final stage business tax on the sale
of the inputs to the nail producer by the input supplier, and (2) the prior stage business tax and
import duties on the sale of materials to the input supplier. Under the PHIC methodology, the final
stage business tax is calculated by multiplying the input coefficient for each input by the business
and municipal tax rate. The prior stage indirect tax and duty incidence is
calculated by utilization of the A and B rebate rates (sector rates) for the I/O sector to which each
physically incorporated input corresponds, as applied to its input coefficient.
On imported raw materials, the PHIC methodology rebates the import tariff and business tax. The
import tariff rate is obtained directly from the Customs Tariff of Thailand. The business tax
rate for this product is a maximum of five percent before adjustment. Under certain circumstances,
it may be less. For the PHIC methodology, the reduced rate business tax was utilized and the lowest
tax rate available was used to calculate the total business and municipal taxes.
The incidence of import duties on imported raw materials is calculated by multiplying the customs
tariff rate by the input coefficient. The incidence of business tax on imported raw materials is
derived by multiplying the business tax rate by the input coefficient plus the incidence of import
duties, plus an increment entitled "standard profit." This "standard profit" is an addition to the
import price of the goods, utilized solely by Thai Customs to increase the assessment base used in
determining the amount of business taxes to be charged on imports.
For the PHIC A rebate rate, the total tax incidence is the sum of business taxes, municipal taxes and
import duties. For the PHIC B rebate rate, it is the sum of business and municipal taxes.

For the denominator to be used in determining the rates of the tax refunds, the MOF compared the
export sale value derived from responses in the survey, to a 'variable cost-price' figure. The MOF
selected the higher of these two prices to use as the denominator in determining the A and B export
tax rebate rates.
In 1987, these new rates were published in No. Or. 2/2530. The PHIC rebate rates for nails
classified in CCCN 73.31 were 6.78 percent (A rate) and 0.13 percent (B rate). This No. Or. 2/2530
was superseded on February 29, 1988 by No. Or. 1/2351, which republished all existing rebate
rates by Harmonized System (HS) classification item number. The No. Or. 1/2351 rates for steel
wire nails classified under HS 7317.00 are 6.78 percent (A rate) and 0.13 percent (B rate). These
rates were in effect during the entire review period.
Because the PHIC methodology is now used by the RTG to determine the rebate rates for nail
exports, the Department must treat these revisions as it would an entirely new program and revisit
the issue of whether or not the program meets our criteria as a legitimate rebate of indirect taxes
and import duties.
To determine whether an indirect tax rebate system, which incorporates rebates of imports duties,
confers a bounty or grant, we must apply the following analysis. First, we examine whether the
system is intended to operate as a rebate of both indirect taxes and import duties. Next, we analyze
whether the
government properly ascertained the level of the rebate. This includes a review of the sample used
in the study, including the documentation and the accuracy of the information gathered from the
sample on input coefficients, import prices and rates of duty on imported inputs, and the exchange
rates used to convert import prices denominated in a foreign currency to the local currency. We
must also determine that, where there is a fixed duty drawback system in place, the import duties
are not being refunded or rebated in an amount greater than the actual duty amount. Finally, we
review whether the rebate schedules are revised periodically in order to determine if the rebate
amount reflects the amount of duty and indirect taxes paid. (See, Final Affirmative
Countervailing Duty Determination and Countervailing Duty Order; Certain Apparel
from Thailand (50 FR 9818, March 12, 1985).)
When the study upon which the indirect tax and import duty rebate system meets the criteria
outlined above, the Department will consider that the system does not confer a bounty or grant
unless the amount set forth in the rebate schedule for the exported product exceeds the amount of
duties and indirect taxes on physically incorporated inputs.

*882

In the Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order; Certain Apparel from Thailand (50 FR 9818, March 12, 1985), we examined the RTG's
rebate system under the Tax and Duty Act. We found that the program was intended to rebate
indirect taxes and import duties. We
compared the bases for the I/O and the PHIC studies, and analyzed the information submitted by
the respondents. Having examined the methodology utilized in determining the PHIC rebates we
find, preliminarily, that these rebates also are intended to rebate indirect taxes and import duties.
We reviewed Thailand's duty drawback system and found that, in order to participate in this
drawback system, a firm must be registered and cannot receive the A rebates which include the
import duties in the calculation. Only unregistered firms may utilize the A rate tax rebates. Based
on the above, we find that there are no overrebates of import duties.
We also find that the RTG properly ascertained the tax and duty rates applicable to each of the
claimed input categories utilized in the production of nails, and that the rates were correctly
applied in the RTG's input coefficient calculation.
However, the respondents did not provide any of the requested supporting documentation, such as
the companies' questionnaire responses or the RTG's calculations of the input coefficients which
were based on these responses. Accordingly, there was not sufficient supporting documentation for
the Department to make a determination as to whether the input coefficients had been properly
calculated.
Based on the above, the Department determines, preliminarily, that respondents have failed to
demonstrate that the rebate rates were reasonably calculated,
and, since the program is available only to exporters, the entire amount of the export tax rebate is
countervailable.
Asoke and KYI accounted for substantially all exports of Thai nails to the United States during the
period. These two firms received only the B tax rebate rate, 0.13 percent, on their nail exports to
the United States.
Accordingly, we preliminarily determine the total net bounty or grant received under this program
to be 0.13 percent.

II. Programs Preliminarily Determined Not to be Used

The Department has examined the following programs and preliminarily determines that the
producers, manufacturers and exporters of the subject merchandise to the United States did not
use them during the period of review.
A. Rediscount of Industrial Bills
B. Electricity Discounts for Exporters
C. Export Processing Zones
D. International Trade Promotion Fund
E. Incentives Under the Investment Promotion Act (IPA)
(l) Assistance to Trading Companies under the IPA (Section 16)
- Exemption of business taxes for suppliers
- Exemption of business taxes for subcontractors
- Entitlement to Export Packing Credits
- A double deduction from taxable income of taxes paid by branch offices outside Thailand
- A double deduction from taxable income of foreign marketing expenses
- Permission to maintain foreign currency bank accounts
(2) Other Incentives
- Section 28, Exemption on import duties and business taxes on machinery used to produce
promoted products
- Section 31, Income tax exemption
- Section 33, Goodwill and royalties tax exemption
- Section 34, Additional tax deduction for dividends paid on promoted activities
- Section 36(2), Exemption of import duties and business taxes on items imported for export
- Section 36(3), Exemption on export duties and business taxes on products produced or
assembled by promoted firms
- Section 36(4), Deduction form assessable income of an amount equal to 5 percent of the increase
over the previous year of income derived from exports
It should be noted that under item E. 1), "Asssitance to Trading Companies Under the Investment
Promotion Act, Permission to Hold Foreign Currency Accounts," Asoke does maintain a foreign
currency account denominated in U.S.
dollars. However, according to the questionnaire response, this account was not used to conduct
transactions involving steel wire nail exports to the United States, or to import inputs for the
production of steel wire nails during the review period.

Preliminary Results of Review

As a result of our review, we preliminarily determine the net bounty or grant on the dutiable
merchandise to be 0.46 percent ad valorem for all shipments of certain dutiable steel wire nails
from Thailand to the United States during the period January 1, 1989 through December 31,
1989. Pursuant to 19 CFR 355.7, any rate less than 0.5 percent ad valorem is de minimis.
With regard to the rescission of that part of the order covering the duty-free merchandise, the
Department intends to instruct the Customs Service to liquidate, without regard to
countervailing duties, all such entries upon which liquidation has been suspended, and,
further, to terminate the suspension of liquidation on future entries of this merchandise.
Regarding the dutiable merchandise covered by this administrative review, the Department intends
to instruct the Customs Service to liquidate, without regard to countervailing duties, all
shipments of the merchandise subject to the countervailing duty order exported on or after
January 1, 1989 and on or before December 31, 1989.

Further, the Department intends to instruct the Customs Service to waive cash deposits or
estimated countervailing duties, as provided by section 751(a)(1) of the Act, on all
shipments of the covered merchandise from Thailand entered, or withdrawn from warehouse,
for consumption on or after the date of publication of the final results of the administrative review.
Parties to the proceeding may request disclosure of the calculation methodology and interested
parties may request a hearing not later than 10 days after the date of publication of this notice.
Interested parties may submit written arguments in case briefs on these preliminary results within
30 days of the date of publication. The case briefs must present in full all arguments that interested
parties feel are relevant to the Secretary's final results in this administrative review. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted seven days after the time
limit for filing the case brief. Any hearing, if requested, will be held seven days after the
scheduled date for submission of rebuttal briefs. Copies of case briefs and rebuttal briefs
must be served on interested parties in accordance with § 355.38(e) of the Commerce regulations.
Representatives of parties to the proceeding may request disclosure of proprietary information
under administrative protective order no later than 10 days after the representative's client or
employer becomes a party to the
proceeding, but in no event later than the date the case briefs, under 19 CFR 355.38(c), are due.
The Department will publish the final results of this administrative review, including the results of
its analysis of

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issues raised in any case or rebuttal brief or at a hearing.
This administrative review and notice are in accordance with section 751(a)(1) of the Tariff Act (19
U.S.C. 1675(a)(1)), and 19 CFR 355.22.
Dated: January 3, 1992

Alan M. Dunn,

Assistant Secretary for Import Administration.

(FR Doc. 92-541 Filed 1-8-92; 8:45 am)

BILLING CODE 3510-DS-M